B C D E F G INDIRECT METHOD Debits Cash Accounts Receivable Inventory Prepaid Insurance Land Buildings Equipment 12/31/2019 111,000 78,000 0 18,000 210,000 600,000 204,000 1,221,000 Credits 12/31/2020 162,000 204,000 162,000 12,000 135,000 600,000 579,000 1,854,000 Accumulated Depreciation, 33,000 Accumulated Depreciation, 30,000 Accounts Payable 120,000 Bonds Payable 450,000 1 Common Stock ($1 par) 180,000 Retained Earnings 408,000 3 1,221,000 4 5 6 Cash Flow Section INDIRECT method: 7 58 59 63,000 84,000 99,000 330,000 660,000 618,000 1,854,000 4 G H 5 Required: 6 Prepare the Statement of Cash Flows for Rich Corp using the INDIRECT method by completing the worksheet below. 7 Prepare the Statement of Cash Flows for RichCorp using the DIRECT method by completing the worksheet below. B Be sure to indicate in which section of the statement each should be shown. 9 10 Rich Corp 11 Income Statement 12 EYE 12/31/20 13 14 Revenues 2,670,000 15 Cost of Goods Sold (1,395,000) 16 Operating Expenses (663,000) 17 Interest Expense (36,000) 16 Loss on sale of equipment (6,000) (2.100,000) 19 Income before income taxes 570,000 20 Income tax expense (195,000) 21 Net Income 375,000 21 Additional Information relating to 2020 activities: 24 Cash dividends of $165,000 were declared and paid Equipment costing $123,000 and having a carrying value of $108,000, was sold for $102,000 cash Equipment with a cost of $498,000 was purchased for cash Operating expenses include depreciation expense of $99,000 and amortization of prepaid expenses of $6,000 Land was sold at its book value for cash Interest expense of $36,000 was paid in cash Common stock was issued for cash Inventory was purchased on credit Assume operating expenses are paid in cash 26 27 20 29 D E F G H Debits 35 36 INDIRECT METHOD 37 12/31/2019 38 Cash 111,000 39 Accounts Receivable 78,000 40 Inventory 0 41 Prepaid Insurance 18,000 42 Land 210,000 43 Buildings 600,000 44 Equipment 204,000 45 1,221,000 46 47 Accumulated Depreciation, 33,000 48 Accumulated Depreciation, 30,000 49 Accounts Payable 120,000 50 Bonds Payable 450,000 51 Common Stock ($1 par) 180,000 52 Retained Earnings 408,000 S3 1,221,000 55 56 Cash Flow Section INDIRECT method: 57 58 59 Credits 12/31/2020 162,000 204,000 162,000 12,000 135,000 600,000 579,000 1,854,000 63,000 84,000 99,000 330,000 660,000 618,000 1,854,000 60